department of labor: 05-99-008-03-386

8/14/2019 Department of Labor: 05-99-008-03-386

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U.S. Department of Labor

Office of Inspector General

Welfare-to-Work Competitive Grants Postaward Survey Results

Additional Policy and Technical Assistance

Will Help Achieve WtW Legislative Intent and

Improve Program Administration

Report Number: 05-99-008-03-386

Report Date: March 24, 1999


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TABLE OF CONTENTS

Page

ACRONYMS/ABBREVIATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii

EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iv

BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii

PRINCIPAL CRITERIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . viii

AUDIT OBJECTIVES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix

SCOPE AND METHODOLOGY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . x

FINDINGS AND RECOMMENDATIONS

1. Inadequate Internal Controls Govern Grantee

Financial and Management Information Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

a. Inadequate Internal Controls Over Cost Limitations . . . . . . . . . . . . . . . . . . . . 1

b. Incomplete/Inadequate Management Information Systems . . . . . . . . . . . . . . . 2

c. Inadequate Internal Controls Over Financial Reporting . . . . . . . . . . . . . . . . . . 3

2. WtW Grantee Policies and Procedures Need Strengthening . . . . . . . . . . . . . . . . . . . . 6a. Lack of Formal Agreements with TANF Agencies . . . . . . . . . . . . . . . . . . . . . 6

b. Lack of Formal Eligibility Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

c. Lack of Written Policies and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

3. Grantee Operations Contain Potential Violations

of the Fair Labor Standards Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

4. Grantees Need to Comply with Welfare-to-Works

Work-First Requirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

5. Proposed Use of Grant Funds for Business Start-Up Operations

and Venture Capital Appears Improper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

6. Single Unit Price Billings Circumvent WtWs

Administrative Cost Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19


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Page

APPENDICES

1. Overview of Principal Criteria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

2. WtW Competitive Grantees Included in Postaward Surveys . . . . . . . . . . . . . . . . . . . . . . 26

3. Suggested Areas for Inclusion in Grantee Written Policies and Procedures . . . . . . . . . . . 27

4. Findings Matrix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

5. Complete Agency Response . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32


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ACRONYMS/ABBREVIATIONS

DHHS Department of Health and Human Services

DOL Department of Labor

ETA Employment and Training Administration

FLSA Fair Labor Standards Act

JTPA Job Training Partnership Act

MIS Management Information System

OJT On-the-Job-Training

OMB Office of Management and Budget

PRWORA Personal Responsibility and Work Opportunity Reconciliation

Act

QFSR WtW Competitive Grant Cumulative Quarterly

Financial Status Report

TANF Temporary Assistance for Needy Families

WtW Welfare-to-Work


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EXECUTIVE SUMMARY

Background, Scope and Objectives

The Balanced Budget Act of 1997 authorized the Secretary of Labor to provide Welfare-to-Work

(WtW) grants to states and local communities to move hard-to-employ welfare recipients intounsubsidized jobs and economic self-sufficiency. The Act authorized $3 billion for WtW grants in fiscal

years 1998 and 1999. Of this amount, approximately 75 percent, or $2.2 billion, is being distributed

by formula to the states and the remaining 25 percent, or $711.5 million, will be awarded through a

competitive grant process. The competitive grants are designed to encourage communities to develop

innovative, results-oriented ways to help long-term welfare recipients gain a secure foothold in the labor

market. The first round of $199 million (announced on

May 27, 1998) was awarded to 51 competitive grant recipients. The Employment and Training

Administration (ETA) administers the WtW program at the Federal level.

We developed a postaward survey guide to assess program implementation for 35 grants awardedduring the first round of WtW competition. Our overall objective was to determine whether the

grantees had implemented and/or adequately planned for the financial management, program delivery

and internal control systems necessary to account for Federal funds and achieve the purposes of their

grants. We issued management letter reports to the individual grantees, with copies to ETA, so that

corrective actions could be promptly initiated. The ETA has been attentive and responsive to the issues

raised during the course of our audit fieldwork.

Results

This report summarizes the results of the postaward surveys of the 35 first-round competitivegrantees. Overall, we found the grantees that we reviewed possessed the capability to adequately

deliver their WtW competitive grant programs. We have findings regarding financial management

systems, policies and procedures and programmatic compliance as follows:

Summary Matrix of Findings (Appendix 4)

Financial Management Policies and Procedures Programmatic Compliance

Finding 1 Finding 2 Finding 3 Finding 4 Finding 5 Finding 6

Inadequate

Internal

Controls

Over Cost

Limitations

Incomplete/

Inadequate

Management

Information

Systems

Inadequate

Internal

Controls

Over

Financial

Reporting

Lack of

Formal

Agreement

with TANF

Agencies

Lack of

Formal

Eligibility

Procedures

Lack of

Written

Policies and

Procedures

Potential

Violations of

the Fair

Labor

Standards

Act

Non-complia

nce with the

Work-First

Requirement

Start-up

Costs and

Venture

Capital

Appears

Improper

Single Unit

Billings

Circumvent

Administrativ

e Cost

Limitations

22 11 16 14 12 27 3 5 2 1

63% 31% 46% 40% 34% 77% 9% 14% 6% 3%


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The matrix shows the number of grantees related to each finding and the percentage of the 35 grantees

surveyed associated with each finding. We believe immediate action is necessary to ensure adequate

internal controls govern grantee financial and management information systems and grantee policies and

procedures.

Also, we believe certain programmatic issues identified during our fieldwork are at the very heart ofWtW program intent -- compliance with the Fair Labor Standards Act (FLSA), adherence to the

WtW work-first requirement, use of WtW funds for business start-up operations/venture capital, and

allowability of single unit price billings. Because these issues pertain to requirements that also apply to

the formula program -- a program three times the size of the competitive grant set-aside -- the potential

impact of our findings is magnified. We believe immediate action should be taken to provide definitive

guidance to achieve WtW legislative intent and improve program administration.

Summary Recommendations

We recommend that the Assistant Secretary for Employment and Training:

C issue policy guidance and instructions and provide technical assistance which fully

addresses WtWs cost limitations and their applicability to the financial reporting

requirements,

C advise WtW grantees to develop formal written Memoranda of Understanding with

local TANF agencies,

C revise the WtW regulations to specifically include the minimum wage provisions of the

FLSA,

C issue specific policy guidance and instructions which fully define and illustrate WtWs

work-first requirement,

C issue policy that prohibits the use of WtW funds as start-up costs for businesses and

capital ventures, and

C require WtW grantees to report Federal expenditures on an actual cost basis

against the prescribed cost categories on the Quarterly Financial Status Report.

Agency Response and Auditors Conclusions

The Assistant Secretary for Employment and Training stated the agency was pleased with our overall

assessment that the grantees reviewed possess the capability to deliver their WtW programs. He also

stated that the postaward surveys were helpful in identifying issues needing attention. However, the


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agency disagreed with our assertion that ETAs policy guidance suggests the number of work hours

established by a grantee should be consistent with local TANF work requirements. The agencys

position on required work hours was further clarified by stating: The Office of Welfare-to-Work has

been careful not to restrict, or in any way define, the number of hours of work required under

the Welfare-to-Work program. ETA indicated,

. . . in the interests of coordination and recruitment of participants from TANF, grantees shouldbe aware of TANF work requirements and take them into account when developing their

programs. The remainder of ETAs response was related to corrective actions being planned or

implemented.

We concur with the corrective actions being planned which address our recommendations. Therefore,

we consider all of our recommendations, with two exceptions, to be resolved but not closed, pending

implementation of corrective action plans. The exceptions are the recommendations to include FLSA

wage provisions in approved grant agreements and defining work-first requirements. We continue to

believe that the Solicitation for Grant Applications and the Special Clauses and Conditions of the grants

should contain FLSA requirements including minimum wage provisions.

Additionally, we believe that ETAs statement quoted above and the policy guidance do suggest to the

reader that work hours for WtW be consistent with the work requirements established by the TANF

agency. Therefore, we continue to emphasize a need to clarify requirements with specific policy

guidance and instructions to fully define and illustrate WtWs work-first requirement and to incorporate

into program guidance a suggested number of work hours as the basis for meeting the work-first

requirement for WtW purposes. ETAs response states, . . . the Department will issue additional

policy guidance which clarifies and illustrates (but does not define or prescribe a minimum

number of hours) WtW work-first requirement. ETAs response does not provide sufficient

information to permit us to resolve our recommendations. We will carefully evaluate whether thecorrective actions taken by ETA fulfill the intent of our recommendations.


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BACKGROUND

The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA)

was enacted August 22, 1996. The PRWORA, a comprehensive welfare reform bill established the

Temporary Assistance for Needy Families (TANF) program to supersede the Aid to Families with

Dependent Children (AFDC), the Job Opportunities and Basic Skills Training and the Emergency

Assistance programs. The TANF provisions substantially changed the nations welfare system from

one in which cash assistance was provided on an entitlement basis to a system in which the primary

focus is moving welfare recipients to work and promoting family responsibility.

On August 5, 1997, the President signed the Balanced Budget Act of 1997. This legislation amended

certain provisions of the Social Security Act and authorized the Secretary of Labor to provide Welfare-

to-Work (WtW) grants to states and local communities for transitional employment assistance to move

the hard to employ TANF welfare recipients into unsubsidized jobs and economic self-sufficiency. The

Balanced Budget Act authorized $3 billion for WtW grants in fiscal years 1998 and 1999.

Approximately 75 percent, or $2.2 billion, will be distributed by formula grants to the states with 85percent being passed through by the states to Service Delivery Areas established under the Job

Training Partnership Act (JTPA) program. Approximately 25 percent, or $711.5 million will be

distributed through a competitive grant process which is designed to encourage communities to develop

new, results-oriented ways to help long-term welfare recipients gain a secure foothold in the labor

market.

The Employment and Training Administration (ETA) published an Interim Final Rule in the Federal

Register on November 18, 1997, implementing the Welfare-to-Work grant provisions

of Title IV, Part A of the Social Security Act, as amended by the enactment of the Balanced Budget

Act of 1997. The first round of $199 million (announced on May 27, 1998) wasawarded to 51 competitive grant recipients.

A majority of first round competitive grants were signed on June 30, 1998, with the period

of performance beginning July 1, 1998. Performance periods of the grants range between

18 and 30 months and must be expended within 3 years.

Training for the first round of competitive grantees was held July 7 - 9, 1998. A second request for

grant applications was published on April 15, 1998, with responses due by July 14, 1998.

The second round of competitive grants were awarded on November 20, 1998, and totaled

$273 million for 75 projects in 44 states, which leaves approximately $239 million available foradditional awards.


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PRINCIPAL CRITERIA

The principal criteria for the WtW program is 20 CFR Part 645, WtW Grants Interim Rule, published

November 18, 1997. ETA plans to issue final regulations. Some of the major provisions of this

program include the work-first philosophy, how funds must be spent and eligibility under the 70/30

percent provisions. The following is an overview of the majorFederal requirements of the program. (See Appendix 1 for more detailed information.)

C Purpose of the WtW Program

C Work-first

C Funds Spent

C 70 Percent Eligibility Provision

C 30 Percent Eligibility Provision

C Mechanisms Must be in Place to Determine Eligibility

C Allowable Activities

C Job Placement Contracts or VouchersC Administrative Costs

C Indirect Costs

C Information Technology Costs

Besides the program requirements identified in 20 CFR Part 645, there are a number of additional

administrative and program guidelines. These additional standards vary as to the type of entity receiving

the grant. The following table provides an overview of the Office of Management and Budget (OMB)

Circulars and Department of Labor (DOL) regulations that are applicable.

OMB Circulars Regulations

Nature of

Grantee

Federal Audit

Requirements

Federal Cost

Principles

Uniform

Administrative

Requirements

Department

of Labor

State/Local

Governments

A-133

Revised

6/24/97

A-87-Amended

8/29/97

A-102-Amended

8/29/97 29 CFR Part 97

Institutions

of Higher

Education

A-21

Revised

5/19/98

A-110

Amended

8/29/97

29 CFR Part 95

Private Non-

Profit

A-122-Revised

6/1/98

A-110-Amended

8/29/97 29 CFR Part 95


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AUDIT OBJECTIVES

Our overall objective was to perform a postaward survey to determine whether the grantees had

implemented and/or adequately planned for the financial management, program delivery systems and

internal controls necessary to account for and safeguard Federal funds and achieve the purpose of the

grant.

Our subobjectives were to determine whether:

C financial management systems and internal controls are adequate to provide reasonable

assurance that Federal funds would be adequately safeguarded and

that expenditures are reasonable, necessary and allowable under the grant,

C planned program management and delivery systems are adequate to achieve the

purpose of the grant,

C planned financial and programmatic reporting systems can be relied upon to produce

accurate, complete and timely reports that are traceable to source documentation, and

C systems/controls are in place and/or being developed to ensure compliance

with applicable laws, regulations and program requirements.

We believe these postaward survey reviews provide an early assessment of grantee operations and can

be used as a positive basis to identify problems and avoid future administrative findings and/or

questioned costs.


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SCOPE AND METHODOLOGY

During July 1998, OIG developed a postaward survey guide for the first round of competitive grants.

The guide was designed to aid auditors in assessing the grantees financial and performance systems.

The survey guide was tested in August at three grantees: The County of Union, Elizabeth, New Jersey;

Resources for Human Development, Philadelphia, Pennsylvania; and DePaul University, Chicago,Illinois.

After the initial three pilot surveys were completed, a decision was made to survey other competitive

grantees. Subsequently, an additional 32 grantees, which were selected on a judgmental basis, were

surveyed across the nation. Fieldwork for the 32 additional grantees

was conducted from September 1998 through January 1999. (See Appendix 2 for a listing

of the 35 grantees reviewed.)

In total, we surveyed 35 of the 51 grantees receiving first round competitive grants. The

35 grants represented 74 percent of the $199,057,074 awarded. During our survey, we determinedwhether the grantees had adequately planned for or implemented operational

internal control structures governing grant assets and adequate financial and programmatic systems.

We also evaluated the grantees capacity to properly administer the WtW competitive grants in

accordance with regulatory requirements. Our examinations were performed in accordance with

Government Auditing Standards.


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FINDINGS AND RECOMMENDATIONS

1. Inadequate Internal Controls Govern Grantee Financial and Management Information

Systems

We determined that overall, the grantees have the capability, including the necessary financialmanagement systems, to administer their WtW competitive grants. However, their financial

and management information systems lack the internal controls necessary to comply with WtWs cost

limitations and financial reporting requirements. If grantees do not develop the proper internal controls

and tracking systems, they will not be able to produce accurate, complete and timely reports that are

traceable to source documentation.

Several grantees advised us that they have not modified existing management information systems or

purchased new or supplementary software to augment existing systems for the

WtW program because ETA has not yet issued participant reporting requirements for WtW

competitive grantees. The delay in the issuance of participant data collection and reportingrequirements may have an adverse effect on the Federal partners(DHHS/DOL) ability to measure the

actual performance of competitive grantees.

We found that most of the grantees were in the early stages of planning and implementing

their WtW program. Only 17 of the 35 grantees we surveyed were operational at the time of

our review. Grantees were in the process of hiring staff, developing working relationships with

local TANF agencies, complying with local and state review and approval requirements, finalizing

agreements with partners and subcontractors, developing operating procedures, and beginning the

process of identifying and recruiting WtW applicants. The grantees slow start

also contributed to the delay in developing financial and management information systems.

Unless grantees implement the recommendations made as a result of our postaward surveys, they are at

risk of being unable to comply with WtWs cost limitations and financial reporting requirements. A

discussion of our findings and recommendations in the areas of (a) cost limitations, (b) management

information systems, and (c) financial reporting requirements follows.

a. Inadequate Internal Controls Over Cost Limitations

WtW competitive grantees financial and accounting systems lack the internal controls

necessary to comply with WtWs cost limitations. Their financial management systemsneed to be modified to control costs applicable to the 15 percent administrative cost

limitation and the 70 percent minimum/30 percent maximum cost limitations. These

financial management systems also need to be modified to track and record costs by

activity and grant budget categories.


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The WtW regulations at 20 CFR 645.211(a) state that, At least 70 percent of the WtW funds

allotted to or awarded to an operating entity . . . must be spent to benefit hard-to-employ

individuals. . . . Section 645.211(b) states,

Not more than 30 percent of the WtW funds allotted to or awarded to an

operating entity . . . may be spent to assist individuals with long-term welfaredependence characteristics . . . If less than 30 percent of the funds is spent to

assist individuals with long-term welfare dependence characteristics, the

remaining funds shall be spent to benefit hard-to-employ individuals pursuant to

paragraph (a). . . .

Section 645.235 (a)(2) states that, The limitation on expenditures for administrative purposes

under the WtW competitive grants will be specified in the grant agreement but in no case shall

the limitation be more than fifteen percent (15%) of the grant award.

We found that the majority of WtW grantees reviewed did not have the internal controls necessary toensure compliance with the above cost limitations. Specifically, we found that

their accounting systems were not set up to record and track direct, indirect and allocated costs

for the appropriate cost categories. In a limited number of instances, we found that the grantee did not

have an accurate understanding of the 70 percent minimum/30 percent maximum cost limitations.

These grantees mistakenly believed that the 70 percent minimum/30 percent maximum applied to the

number of participants enrolled under the grant and not to total Federal expenditures.

We also found that grantees had not developed subgrant budget formats and financial reporting

requirements that would ensure that subgrantee accounting systems had the internal controls necessary

to comply with these cost limitations. Since the WtW cost limitations apply to total Federalexpenditures, the inability of subgrantees to record, track, document and report costs would adversely

affect the grantees ability to report total Federal expenditures that are accurate and complete.

b. Incomplete/Inadequate Management Information Systems

WtW competitive grantees have not been provided participant data collection and reporting

requirements. As a result, several grantees have not established either a participant tracking system or

a participant database. A grantees inability to collect performance data may impair ETAs ability to

effectively measure program performance.

The WtW regulations at 20 CFR 645.240 require the Department of Labor (DOL) to issue instructions

and formats for financial reporting and the Department of Health and Human Services (DHHS) to issue

instructions for participant reporting. Section 645.515 also authorizes DOL to establish supplemental

reporting requirements for competitive grant recipients.


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On June 24, 1998, ETA issued Field Memorandum Number 38-98, entitled Welfare-to-Work

Reporting. The purpose of this field memorandum was to transmit WtW financial reporting formats

and corresponding instructions for both formula and competitive WtW grants, and to set forth Regional

Office and National Office roles in the reporting process. This reporting format and instructions were

subsequently incorporated into existing grant agreements by a unilateral grant modification effective July

1, 1998.

On October 29, 1998, DHHS published in the Federal Register an Interim Rule that specifies the WtW

reporting requirements for states and Indian Tribes. These reporting requirements are restricted to

WtW formula grantees. The Interim Rule further stated that the DOL will specify participant reporting

requirements applicable to all individuals enrolled in the WtW competitive grant program. The data will

be reported to DOL by the grantee unless the states agree to compile and transmit the data to DHHS.

DHHS and DOL will develop a common data format and specifications to facilitate this complementary

reporting. To date, the DOL has not issued specific participant reporting requirements

applicable to WtW competitive grant programs.

We found that several grantees had not established either a participant tracking system or

a participant database for the WtW program. In some cases, the grantee was using an electronic

spreadsheet to track participant progress through the program. However, this

may not be sufficient to meet WtW data reporting requirements when program reporting requirements

and participation increases.

Several grantees have decided to wait for ETA to provide participant reporting requirements before

they modify existing management information systems or purchase new or supplementary software to

augment existing systems. We also found that some of the grantees needed to update their existing

written procedures to address WtW requirements.

c. Inadequate Internal Controls Over Financial Reporting

Some of the WtW competitive grantees we examined (16 of 35) did not have internal controls in place

to produce accurate, complete and timely reports of costs for program activities which are traceable to

source documentation. Grantee accounting systems were not set up to track and record direct,

indirect and allocated costs by program activity.

Section 645.240(a) of the WtW regulations states that, . . . All States and other direct grant

recipients shall report pursuant to instructions issued by DOL (financial data) and by DHHS(participant data).


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ETAs Field Memorandum No. 38-98, dated June 24, 1998, transmitted WtW financial reporting

formats and corresponding instructions for both formula and competitive grants to the ETA regional

offices. This field memorandum included OMBs approval of the WtW reporting requirements as well

as roles and responsibilities assigned ETAs national and regional offices.

ETA has developed a WtW monitoring guide to be used by Federal staff in monitoring WtWcompetitive and formula grants. This monitoring guide includes provisions for reviewing financial

management and accounting systems as well as financial reporting.

WtW grantees will report the required data elements electronically via the Internet on a WtW

Competitive Grant Cumulative Quarterly Financial Status Report (QFSR). The QFSR has two

sections which require financial information. The first section requires grantees to report Federal

expenditures against WtWs cost limitations. Federal expenditures are to be reported based on the 15

percent administrative cost limitation and the 70 percent minimum/30 percent maximum cost limitations.

This section also requires that Federal Technology and Computerization expenditures, which the

regulations exclude from being charged to the administrative cost category, be reported as a single lineitem.

The second section of the QFSR requires that expenditures be reported by program activity. These

activities include such items as community services, work experience, job creation employment wage

subsidies, on-the-job training, job readiness services, job placement services, post-employment

services, job retention services and supportive services. ETAs reporting instructions do not contain

either definitions or examples of individual program activity categories. ETA advised WtW

competitive grantees, at their initial training session in July 1998, that they should develop definitions for

each activity category that are consistent with the definitions in their States TANF plan.

Recommendations:


S issue policy guidance and instructions which fully explain the 70 percent

minimum/30 percent maximum WtW cost limitations,

S monitor grantee operations to ensure that the appropriate internal controls are in

place at both the grantee and subgrantee levels to ensure that financial reporting

systems can be relied upon to produce accurate, complete and timely reportsthat are traceable to source documentation,


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S issue interim guidance to WtW competitive grantees until specific participant

reporting requirements can be published in the Federal Register. This guidance

should include participant data collection requirements and establish an effective

date for the collection of participant data for reporting purposes,

S conduct onsite reviews of grantee financial and management informationsystems to ensure that grantees develop the internal controls necessary to

report financial information on an accurate, complete and timely basis, and

S provide immediate technical assistance to any WtW grantee that lacks the

necessary internal controls to comply with WtWs financial reporting

requirements.


ETA outlined its plans to provide technical assistance through financial procedures training in April,based on a new financial management technical assistance guide (TAG). The TAG will address cost

limitations, internal controls over and formulating systems for financial and performance activities, and

reporting.

Also, ETA plans to issue additional policy guidance which more fully explains the 70/30 percent cost

limitations and reporting requirements. The agencys plans include monitoring the grantees to assess

whether their reporting systems are in place and whether data is traceable to source documentation.

Next month, ETA is planning to submit to OMB participant reporting requirements. When approved,

the participant reporting requirements will be covered in orientation and training sessions.

ETAs planned corrective actions are responsive to our recommendations which are considered

resolved, but not closed, pending receipt of reported implementation of ETAs plans.


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2. WtW Grantee Policies and Procedures Need Strengthening

The large majority of grantees (as many as 27 of 35) have not reduced to writing either their internal or

external operating procedures for the WtW program. Most grantees have established operating

procedures covering their general operations. However, these procedures have not been modified to

address their additional responsibilities under the WtW program. The formalization of operatingprocedures, including duties and responsibilities, is especially important when they address their

relationship with outside agencies that will provide major services required under the WtW regulations.

a. Lack of Formal Agreements with TANF Agencies

WtW grantees have developed informal relationships with local TANF agencies that do

not fully define the roles and responsibilities of each agency. Good internal control practices dictate

that, since TANF information is necessary to determine the eligibility of every WtW participant,

identifying roles and responsibilities as well as establishing accountability is critical to the flow of

information as well as making an accurate eligibility determination.

These informal relationships and procedures could lead to misunderstandings for grantees in complying

with WtW eligibility requirements. Therefore, it is in the grantees best interest to reduce their

relationship with the TANF agency to written form so that each agencys roles

and responsibilities can be clearly defined.

The WtW regulations at 20 CFR 645.214 (a) state that the grantee is responsible for

ensuring that WtW funds are spent only on individuals eligible for WtW projects. Section 645.214 (b)

states that, The operating entity must ensure that there are mechanisms in place

to determine WtW eligibility for individuals who are receiving TANF assistance. . . .

Section 645.214 (b)(1) states that these mechanisms, Must include arrangements with the TANF

agency to ensure that a WtW eligibility determination is based on information, current at the

time of the WtW eligibility determination, about whether an individual is receiving TANF

assistance . . . the length of receipt of TANF assistance . . . and when an individual may become

ineligible for assistance. . . .

The WtW regulations allow the grantee and the local TANF agency to determine the scope of their

working relationship, including developing operating procedures and defining roles and responsibilities.

Since receipt of TANF assistance will be the most critical eligibility criterion in the majority of cases, itis essential that the TANF agency be the source of information about whether an individual is receiving

TANF assistance, the length of such assistance, and the applicable time limits governing such

assistance.


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Because of the importance of TANF data to the eligibility determination process and the grantees

necessary reliance on the TANF agency for such data, the lack of written agreement may expose the

grantee to questioned costs, if the information provided is in error.

b. Lack of Formal Eligibility Procedures

WtW grantees have developed informal procedures for determining eligibility. However, these

procedures do not fully identify what information will be collected to determine eligibility, how eligibility

information will be collected, and what procedures will be followed to determine an applicants WtW

eligibility.

The WtW regulations state that the grantee is accountable for ensuring that funds are spent on

individuals who are eligible for the program. The regulations also acknowledge that the grantee will

need the assistance of outside parties to determine WtW eligibility. The eligibility criteria may include a

multitude of factors, such as the applicants status of TANF assistance, barriers to employment,

characteristics associated with long-term welfare dependency, substance abuse and school achievementlevels. Therefore, the grantee will need to deal with a variety of agencies and individuals to gather

information and document their eligibility determination.

ETA has developed a WtW monitoring guide to be used by Federal staff in monitoring competitive and

formula grants. This monitoring guide includes provisions for reviewing policies and procedures

applicable to the eligibility determination process. These provisions also include a requirement to

review a sample of participant records as well as the grantees working relationship with the local

TANF agency.

We found that several of the grantees need to develop formal written eligibility determinationprocedures. These written procedures should include instructions for the completion of intake,

application and eligibility determination forms. As a direct result of our onsite reviews, some grantees

revised their eligibility forms and eligibility requirements. These changes were made to meet the

technical legislative amendments regarding eligibility of non-custodial parents.

c. Lack of Written Policies and Procedures

We found that the grantees were in the early stages of planning and implementing their competitive

grants. Generally at the time of our visits, the grantees programs were not yet operational or only a

fewWtW participants were enrolled.

The most consistent discrepancy noted among the grantees surveyed was that WtW written policies

and procedures had not been fully developed or were in the early stages of development. We found

that a majority of the grantees had existing policies and procedures, but they did not address Federal


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requirements. Our review identified that 27 of 35 grantees (77 percent) did not have written

procedures for WtW financial and performance operations.

Good accounting practices and internal controls require written policies and procedures; for instance,

29 CFR 95.21(b) states:

. . . financial management systems shall provide . . . (6) Written procedures for

determining the reasonableness, allocability and allowability of costs in

accordance with the provisions of the applicable Federal cost principles and the

terms and conditions of the award.

Written procedures are particularly important to a program where new staff is being hired and many of

the activities are contracted to subrecipients. It is important to have written policies and procedures to

gain an understanding of the pertinent program requirements and to serve as a standard for program

operations.

Supplements to current policies and procedures are necessary to help grantees establish more effective

and efficient WtW operations and results. WtW procedures should address the principal requirements

and provisions found in the WtW Interim Rule and related Federal requirements. To assist several

grantees during our visits, we provided them with a binder outlining a number of areas that should be

included in their policies and procedures. (See Appendix 3 for some of the areas that should be

considered for written policies and procedures.)

We also advised several grantees that related OMB circulars and Federal regulations should be

included as appendices to their written policies and procedures. Combining the materials in one binder

provides an easy reference for most issues related to WtW program and Federal requirements.Written procedures should benefit staff working on the WtW program.

Recommendations:


S issue specific policy guidance and instructions that fully delineate a grantees

responsibilities concerning developing a working relationship with the local

TANF agency,

S advise WtW grantees to develop written Memoranda of Understanding with

local TANF agencies that fully outline their specific roles and responsibilities

under the WtW program,


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S strongly encourage grantees to develop formal written eligibility procedures

which fully explain specific roles and responsibilities of all parties involved in the

grantees eligibility determination process, and

S issue a Technical Assistance Guide to assist grantees in developing adequate

written policies and procedures for the WtW program. Adequate policies andprocedures should include both financial and performance requirements.


ETA responded that it has scheduled along with HHS, a series of TANF/WtW conferences to address

procedural problems (including eligibility) that exist between the two programs. Plans are to issue

similar guidance by both programs. ETA anticipates that development of formal Memoranda of

Understanding will be based on this guidance. ETA will encourage grantees to establish formal written

procedures for specific topics and will provide guidance through the new TAG and individual policy

issuances.


resolved, but not closed, pending receipt of reported implementation of ETAs plans.


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3. Grantee Operations Contain Potential Violations of the Fair Labor Standards Act

Three grantees substituted stipends, assistance/points and voluntary/non-paid work activities for wages

in possible violation of the minimum wage provisions of the Fair Labor Standards Act (FLSA). In two

of the three instances identified, these activities were included in the approved grant agreement. These

compensation arrangements appear to violate the FLSA and may result in a liability for payment ofback wages to participants. To properly comply with FLSA requirements, grantees may be required to

restructure their grant budgets to ensure that the minimum wage is paid, resulting in a higher cost per

participant than originally planned, thus reducing the number of participants that can be served under the

grant.

The Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) is silent on the

question of whether minimum wage protection applies to participants in work programs under TANF.

In May 1997, the Department of Labor issued a policy announcement explaining that the PRWORA

does not exempt work participants from the FLSA and that Federal employment laws such as the

FLSA apply to welfare recipients as they apply to other workers. This guidance provides that welfarerecipients engaged in work activities are subject to the minimum wage requirements.

We noted that the WtW regulations, grant assurances and the approved grant agreements do not have

specific language that fully addresses the minimum wage provisions of the FLSA. We also noted that

the ETAs grant review and approval process did not identify these potential violations of the FLSA.

We identified what amounted to a voluntary work program at a multi-site WtW grantee serving

9 states with 27 local sites. At each of the four sites visited, WtW participants were placed in a non-

paid or voluntary work activity in order to meet WtWs mandatory work-first requirement. Some of

the WtW participants have been enrolled in this voluntary/non-paid work activity since September1998. This voluntary work activity may be in violation of the FLSA minimum wage requirements.

At the four local sites we visited, this grantee offered a minimal number of hours of unpaid/voluntary

work activity per week in addition to vocational training. For example, at two local sites the

participants worked two to five hours per week. The vocational training was designed to meet an

allowable exception to the local TANF agencys work requirements for TANF recipients.

The second grantees approved project proposal included stipends in lieu of wages for its work

experience programs. We found that the budgeted amounts for stipends were not sufficient to comply

with the FLSA minimum wage requirements. This issue was discussed with the area FLSArepresentative, who determined that the grantee should pay the minimum wage in its work experience

programs.


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At a third grantee, we found that the WtW participants enrolled in work experience were receiving

assistance/points in lieu of wages. The budget narrative of the approved project proposal states the

following regarding the payment of participant wages and fringe benefits: Rather than paychecks

and fringe benefits (because this is work experience), participants will have, passbooks, which

track earned points. Points may be exchanged for items in the store; choices will include food

stuffs, gift certificates, soft goods, and hard goods. Funds will be used to supplement businessand industry donations.

This grantee believed the WtW participants were receiving the equivalent of the minimum wage in the

form of assistance/points. The grantee also stated that, In the State of Georgia, the workfare

participant is considered an employee of the State, not of the [grantee]. Thus, the total dollar

amount of the trainees assistance divided by the minimum wage yields the maximum number of

hours the participant can receive work experience.

We disagree with the grantees interpretation. Welfare recipients who are enrolled in state workfare

programs which require recipients to work in return for their welfare benefits must be compensated atthe minimum wage if they are classified as employees under FLSAs definition. Once welfare

recipients are enrolled in the WtW program, they are also subject to the minimum wage provisions of

the FLSA. The basic issue is who is the employer. Since the welfare recipients are enrolled in the

grantees WtW work experience program, we believe that they are not state employees and that the

WtW program should adhere to the minimum wage provisions of the FLSA.

Recommendations:


S identify all WtW competitive grantees that are not paying the established minimum wage and

obtain a written decision from the area FLSA representative concerning the grantees

compliance with the minimum wage provisions of the FLSA,

S issue specific policy guidance to grantees concerning the minimum wage provisions of the

FLSA, and

Srevise the grant application and grant review process to ensure that the minimum wage

provisions of the FLSA are included in any approved grant agreement.


ETA reports it has discussed the Fair Labor Standards Act (FLSA) problems identified in our report

with DOLs Wage and Hour Division. The grantees with FLSA problems have been contacted via a

conference call with the Wage and Hour Division to outline corrective actions.


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WtWs monitoring guide is designed to address minimum wage issues through scheduled monitoring

visits which are currently under way. Wage and Hours Division will be consulted, if problems are

found.

ETA further states that their grant transmittal letter contains bold underlined language specifically

mentioning adherence to all Federal statutes including the FLSA. DOLs publication, HowWorkplace Laws Apply to Welfare Recipients has been included on the WtW website. Wage and

Hour provided an overview of the FLSA requirements during the orientation training for the round two

competitive grantees. ETA believes the FLSA issues which occurred in 3 of the 35 grantees surveyed

are exceptions to an otherwise well-informed group. Accordingly, ETA does not expect FLSA

problems related to the formula grantees which have experience with DOL programs and requirements.

ETA believes that the current regulatory language on the need to adhere to Federal statutes and the

activities and products being planned are sufficient regarding FLSA requirements.

We concur with the corrective actions being taken by ETA and find these recommendations resolved,

but not closed, except for revising the grant solicitations and agreements. We believe that to furtherensure adherence to the FLSA requirements, it is appropriate that the Solicitation for Grant

Applications (SGA) and the Special Clauses and Conditions of the grants should contain FLSA

requirements including minimum wage provisions.


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4. Grantees Need to Comply with Welfare-to-Works Work-First Requirement

At three grantees, we found training was either planned or provided prior to participation in

employment activities, which is contrary to WtWs work-first concept. At a fourth grantee, that

operated multiple sites, four of the sites we visited offered voluntary or non/paid work activities, raising

a question as to whether these activities meet the minimum number of hours to constitute work forpurposes of WtW.

The Department of Labor (DOL) has been very clear in outlining the legislative intent of the WtW

program. WtW is unique among employment and training programs in that it requires an individual to

be placed in subsidized or unsubsidized work activities prior to receiving education and skills training

related to the job. Previous programs, such as the Job Training Partnership Act (JTPA) of 1982, as

amended, and its predecessor, the Comprehensive Employment and Training Act (CETA) of 1973,

emphasized training and supportive services followed by job placement. However, the WtW program

requires participants be engaged in employment-based activities prior to receiving post-employment

services.

The ETA announced the first solicitation for grant applications for WtW competitive grants in the

Federal Register on December 30, 1997. ETAs solicitation stated that competitive grant projects

would be expected to achieve the overall purpose of the WtW program, which is, To provide

transitional assistance which moves welfare recipients into unsubsidized employment providing

good career potential for achieving economic self-sufficiency. ETAs solicitation also states that:

This transitional assistance is to be provided through a work-first service strategy in

which recipients are engaged in employment-based activities. Grant funds may be used

to provide needed basic and/or vocational skills training as a post-employment service inconjunction with either subsidized or unsubsidized employment.

Section 645.220 of the WtW regulations provides that basic educational skills training and occupational

skills training are allowable activities, but only as post-employment services. The narrative discussion of

the meaning of this section states that:

While the legislation does not permit stand-alone training activities independent of a

job, allowing them as post-employment activities only while the participant is working in

a subsidized or unsubsidized job reflects the basic work-first thrust of the legislation,

while recognizing the critical importance of continuous skills acquisition and lifelonglearning to economic self sufficiency.

One grantee we visited assumed that all TANF recipients referred by the local TANF agency had been

placed by that TANF agency and, therefore, met the WtWs work-first requirement. The grantee

obtained no evidence or assurance that the work-first requirement was being met. For


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example, the local TANF agency requires TANF recipients to either work at least 25 hours per week

or conduct 40 job searches per week to retain their TANF benefits. If the TANF recipient conducted

40 job searches per week in lieu of working 25 hours per week, s/he would meet the local TANF

agencys work requirements, but not WtWs work-first requirement.

Basic educational skills training and occupational skills training are allowable activities as post-employment services, but not allowable as a stand-alone activity. However, at a second grantee, the

description of several of the grantees work experience programs disclosed that training appears to be

given prior to finding the participants employment or enrolling them in a work activity. A third grantee

had a contract with a private-for-profit employer which called for preemployment training, which

included an initial 8 week classroom instruction and orientation phase followed by an on-the-job-

training (OJT) phase for those trainees found capable. In both situations, the length and depth of the

training appears to go beyond the type of job readiness orientation or employment assessment allowed

by the WtW regulations and, therefore, does not pass the work-first test.

Minimum Hours of Work

The welfare reform bill, PRWORA, included a requirement that 25 percent of all TANF families and

75 percent of two-parent families have an adult engaged in work activities in FY 1997 (families with no

adults were exempted). States were given the option of exempting single parents of children under one

year of age from the work requirement. In order to be counted towards the work participation rate, a

single parent is required to be engaged in a work activity, as defined by the law, for 20 hours per week

in FY 1997. For an adult in a two-parent family,

35 hours of work are required. The mandated hours of work for single parents increased to

25 hours in FY 1999 and 30 hours in FY 2000. Qualifying work activities include a range of

subsidized and unsubsidized, private and public sector employment. In addition, a limited number ofTANF recipients can meet the work requirement by participating in vocational training and high school

education programs.

WtW regulations do not specifically prescribe the minimum number of hours necessary to meet the

work-first requirement. However, WtWs work-first requirement refers to the TANF concept that

the primary focus is on placing individuals in employment activities. The Department of Labors policy

guidance suggests that the number of hours established by a WtW grantee be consistent with the work

requirements established by the local TANF agency.

We visited a national WtW grantee serving 9 states with 27 local sites. At each of the four local siteswe visited, the WtW vocational training/work activity schedules appeared to be designed to meet the

local TANF work requirements rather than the WtW work-first requirement. The principal emphasis

was placed on vocational training, independent of subsidized or unsubsidized employment with

voluntary/non-paid work activity (average of 2 - 5 hours per week) being added in an apparent attempt

to meet the work-first requirement.


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In each of the states we visited, the local TANF agency requires a minimum number of hours of work

per week to maintain TANF benefits. Each state also allows TANF recipients to participate in

approved vocational training in order to meet local TANF work requirements. The grantees

vocational training courses may meet the local TANF work requirements but, because they are not

principally employment activities, do not meet WtWs work-first requirement.

Recommendations:


S issue specific policy guidance and instructions which fully define and illustrate

WtWs work-first requirement,

S incorporate in program guidance a suggested number of work hours as the

basis for meeting the work-first requirement for WtW purposes, and

S take appropriate action to revise grantee operations which are not in

compliance with WtWs work-first requirement.


ETA stated that through extensive public consultations prior to issuing the Interim Rule, the Department

has sought to provide grantees with the maximum flexibility in defining programs for their communities.

ETA also states the TANF holds as one of its basic tenets the empowerment of the states and localities

regarding definitions and program design. DOL current policy guidance encourages grantees to take

into consideration the work requirements established by TANF for the WtW program.

Additionally, ETA stated that work-first has been addressed in the SGAs that were issued. ETA also

plans to issue additional policy guidance which clarifies and illustrates, but does not define or prescribe

a minimum number of work hours. ETA stated they are working with the grantees identified as having

work-first issues to reflect the intent of the legislation. ETA took exception to a statement in our report

that policy guidance suggests the number of work hours established by a grantee should be consistent

with local TANF work requirements.

We concur with the corrective actions being planned by ETA. However, we consider the

recommendations unresolved. It is our opinion that the policy guidance does suggest that workrequirements be consistent with local TANF work requirements. Therefore, illustrations of acceptable

work-first activities should be provided in program guidance to the grantees. Additionally, monitoring

visits should include identification of grantees not in compliance with the work-first requirement so that

corrective actions can be initiated.


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The WtW regulations reference job creation at 20 CFR 645.220(b)(3) as:

Job creation through public or private sector employment wage subsidies. . . .

While this definition may not be comprehensive for all acceptable job creation activities, it does

provide insight as to what is acceptable. We believe the regulation does not provide for subsidizationof a private-for-profit business operation which is not acceptable as a job creation activity.

In November, ETA received a letter from the grantee which stated that $248,851 of its own funds

(which is approximately 25 percent of the WtW grant award) had been advanced to the subrecipient.

The letter also stated that the business was not operational and no training equipment was available for

onsite training of participants. On December 28, 1998, the PIC submitted an invoice totaling

$425,358 to ETA for payment. The invoice was not accompanied by supporting documentation and

was not approved for payment. ETA approved a total of $20,400 for the wages of 17 welfare

participants being trained to operate equipment.

In December, the grantee revised the contractors budget amount to $669,095. The revised contract

also changed the emphasis from start-up costs to providing $491,047 for extraordinary OJT training

costs. The lack of a WtW definition for OJT makes it difficult to evaluate the reasonableness and

acceptability of these training costs. Normally, OJT contracts are awarded to cover only the

reimbursement of extraordinary costs incurred by the employer to train participants. Moreover, the

revised cost proposal appears unreasonably high to train only

65 participants, amounting to approximately $7,554 per participant.

On January 19, 1999, we initiated a meeting with ETA officials in the Atlanta Regional Office. ETA

informed us that they will continue to require the grantee to submit invoices and supportingdocumentation for related expenditures. At this time, only participant costs (salaries and fringe benefits)

will be reimbursed.

Joint Venture Partnership

While completing fieldwork at one grantee, we were informed of the grantees plan to enter into a joint

venture with other local agencies and a private-for-profit employer. This start-up venture included in its

budget $500,000 in WtW funds that would be used for the purchase of manufacturing equipment.

Representatives of the grantee indicated that this equipment would be used to retrofit a manufacturing

operation to produce aluminum windows.

The WtW grant states that a local community-based organization which promotes job placement and

training activities to local residents is planning a joint venture partnership to accomplish its goals. The

venture plans to establish a plant to train and provide job opportunities for WtW participants to


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manufacture and install customized aluminum windows. The project is expected to produce at least 45

new jobs and 55 OJT opportunities.

The cost of operating a business is not an allowable activity under 20 CFR 645.220.

Moreover, we share the concerns expressed by ETA regional management regarding the policy of

using public grant monies to finance start-up, private-for-profit, risk ventures. The organizationbeing formed for this project is not an established going concern and has no proven record of

success. Also pertinent is the impact of this organization which will be in competition with other

aluminum window manufacturers in the local area.

Although WtW funds are being required up-front, the benefits to participants will only occur through

job training and OJT activities of the joint venture, which is dependent upon the ability of the business to

secure all the funding necessary to begin operations. Yet, a completed business plan was still in the

developmental stages at the time we completed our postaward survey.

The regulation at 20 CFR 645.265 provides safeguards to ensure that participants in WtW activities donot displace other employees. Also, regulations require that WtW activities shall not violate existing

contracts or agreements, replace laid-off workers, or replace involuntary reductions in the workforce,

including the number of hours worked. A new entry into the competitive field could adversely affect

other workers in the same field.

Recommendations:


S issue policy that prohibits the use of WtW funds for start-up costs related to newbusinesses and capital ventures, and

S take actions as necessary to de-fund or restructure existing projects that have used or

intend to use WtW funds for business start-up, capitalization or other unallowable

costs.


ETAs response stated that the Office of Welfare-to-Work will issue a policy prohibiting the use of

WtW funds for business start-up costs and will restructure any existing projects. Job readinessactivities will include provisions for WtW participants to start a business. ETA stated that they would

allow approved tool and machinery costs for WtW projects.


resolved, but not closed, pending issuance of revised policy and restructuring of existing projects.


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6. Single Unit Price Billings Circumvent WtWs Administrative Cost Limitation

While the WtW regulations at 20 CFR 645.235, and the grant agreement itself establish a 15 percent

limitation on administrative costs, we found one private nonprofit grantee had structured its competitive

grant agreement to recover costs on a single unit charge basis. According to the grant, all costs,

including operational (administrative) expenditures, will be charged to only one program costcategory.

By way of explanation, the grant states that the grantees costs are based on published catalog tuition

prices. The grantee has developed a listing of tuition costs for each vocational training course offered.

The grant agreement does not include detailed explanations as to how individual tuition costs were

compiled. The unit price varies dependent upon the individual class. We were advised that the tuition

price for each class was based upon local site costs, plus regional costs, plus national office costs.

National office and regional office costs appear to include such items as administration, oversight,

technical assistance and indirect costs.

Further, the grant cites the Job Training Partnership Act regulations at 20 CFR 627.440(e)(3) as

allowing commercially available off-the-shelf training packages to be single unit charged to the

program category. The JTPA regulations cited by the grantee do not apply to WtW. Even if they did,

the JTPA regulations at 20 CFR 627.440(e)(3) conditions single unit charging of commercially available

off-the-shelf training to subrecipient awards. In this case, the grantee is the primary recipient, not a

subrecipient.

The WtW regulations at 20 CFR 645.235 specifically require that recipient, subrecipient or PIC costs

for overall program management, program coordination and general administrative functions

be charged to the administrative cost category. Also, pursuant to 20 CFR 645.230 of the WtWregulations, the grantee is subject to OMB Circular A-122, Cost Principles for Nonprofit

Organizations. Attachment A.4.a. of Circular A-122 requires that costs be allocated . . . to a

particular cost objective . . . in accordance with the relative benefits received. . . .

We believe the failure to separately report administrative expenditures is contrary to WtW

requirements, which intend to limit the amount of funds spent on administrative -- as opposed to

program -- costs. The effect of the grantees single unit charging of all WtW costs to the program

category is that ETA will have no basis for determining if the grantee is in compliance with WtWs

administrative cost limitation. Despite the grantees plans to report all costs under the program cost

category, we noted that the grantees accounting system has the capability to report WtW costs to theappropriate cost categories on an actual cost basis.

In addition, the total amount of this grant is included on the contractual line item in the approved grant

budget. The grantees explanation of this budget item is that all WtW participants enter into a written

contract/WtW service agreement upon entry into the program. However, as the participants are


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recipients, rather than providers of service, we believe characterizing their costs as contractual is highly

misleading, if not misrepresentative.

We also are concerned about provisions in the grant agreement which allow the grantee to bill for

training not rendered. This WtW service agreement states that the grantee will bill the WtW grant for

the cost of short-term training if the WtW participant, after being placed in a job, refuses to return totraining. The project proposal incorporated into the approved grant agreement states that a nominal

charge equivalent to the average cost per placement of the short-term training will be assessed by the

grantee. The grant agreement states that the average cost of short-term training is $2,810 per trainee.

Since short-term training will not be provided if the participant refuses to attend, the effect of this

provision permits the grantee to charge the grant for services not provided to participants.

Recommendations:


S modify the grant agreement to require the grantee to allocate and report WtW

expenditures to the benefitting cost categories (administrative and program), and

S eliminate the provision in the approved grant agreement that allows the grantee to bill

for short-term training when an individual, upon initial placement by the grantee, refuses

to return for training.


ETA responded that the Department will work with the specific grantee to assure it accounts for andreports WtW expenditures according to benefiting cost categories and program activities in accordance

to the WtW financial report instructions. ETA also stated that the provision which allows for billing of

short-term training (which may not be received) after initial placement, will be eliminated from the grant.

We concur with ETAs planned corrective actions which are responsive to our recommendations. We

consider these recommendations resolved, but not closed, pending receipt of reported implementation

of planned actions.


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Appendix 1

Page 1 of 5

Overview of Principal Criteria

The following is an overview of the principal criteria for the WtW program as summarized from theWtW regulations.

! Purpose of the WtW Program:

CTo facilitate the placement of hard-to-employ welfare recipients in lasting unsubsidized

employment and self-sufficiency.

CProvide a variety of placement activities featuring the work- firstphilosophy.

CTo provide a variety of post-employment and job retention services.

CTarget hard-to-employ welfare recipients in high poverty areas.

(20 CFR 645.110)

! Work-First:

Placing individuals in employment activities before providing support services such as basic

skills training, child care and transportation. Job readiness, employment activities and

placement services are the only allowable preemployment activities.

(20 CFR 645.110) and (20 CFR 645.220)

! Funds Spent:

CAt least 70 percent must benefit the hard-to-employ individuals.

CNo more than 30 percent must be used to assist individuals with long-term welfare

dependence characteristics. (20 CFR 645.211)


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Appendix 1

Page 2 of 5


! 70 Percent Eligibility Provision:

(a) Must meet all three criteria:

1. Currently receiving TANF assistance;

2. Participant must meet two of the three barriers to employment:

A. has not completed secondary education or obtained GED and has low

reading and math skills,

B. requires substance abuse treatment for employment, or

C. has a poor work history (worked no more than 3 of the last 12

months);

3. Receiving TANF for at least 30 months or will become ineligible for assistancewithin the next 12 months.

(b) A noncustodial parent of a minor, if the custodial parent or minor children meet the

criteria in (a) 1 & 3 and the noncustodial parent meets two of the three barriers to

employment. (Revised according to the Technical Amendment)

(c) An individual who meets two of the three barriers to employment and would be eligible

to receive TANF, but has reached the lifetime limitation.

(20 CFR 645.212)

! 30 Percent Eligibility Provision:

(a) The individual is receiving TANF and has characteristics associated with long-term

welfare dependence:

1. dropped out of school,

2. teenage pregnancy,

3. poor work history, or

4. other approved characteristics.

(b) A noncustodial parent of a minor child, if the noncustodial parent has long-termcharacteristics specified in (a) and the custodial parent is receiving TANF assistance.

(c) An individual who has characteristics associated with long-term welfare dependence

and would be eligible to receive TANF, but has reached the lifetime limitation. (20

CFR 645.213)


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Appendix 1

Page 3 of 5


! Mechanisms Must be in Place to Determine Eligibility:

CThe grantee must make arrangements with the TANF agency to ensure that WtW eligibility

determination is based on current information and whether an individual is receiving TANF

assistance.

CThe assessment may include a determination of the barriers to employment.

CInformation collected by the TANF agency may be valid for up to 6 months prior to the

WtW eligibility determination.

CMechanisms must be in place to determine eligibility for individuals not receiving TANF and

for those who have reached their lifetime limitation.

CEligibility for WtW need not be redetermined after services are received.

(20 CFR 645.214)

! Allowable Activities:

(a) Job Readiness

(b) Employment Activities:Community Service Programs

C Work Experience

C Job Creation through wage subsidies

C OJT

(c) Job Placement Services using vouchers or contracts

(d) Post-employment Services:

C Basic educational skills training

C Occupational skills training

C ESL training

CMentoring


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Appendix 1

Page 4 of 5


(e) Job retention and support services:C Transportation assistance

C Substance abuse treatment

C Child care assistance

C Emergency or short-term housing

C Other supportive services

(f) Individual Development Accounts

(g) Routine activities such as intake, assessment, eligibility determination, Individual Service

Strategy and case management. (20 CFR 645.220)

!! Job Placement Contracts or Vouchers:

Job placement contracts or vouchers must include a provision that at least one-half of the

payments occur after the individual is placed in an unsubsidized job for 6 months.

(20 CFR 645.230)

! Administrative Costs:

Competitive grants administrative expenditures are limited to a specified percentage in the grant

agreement not to exceed a maximum of 15 percent. (20 CFR 645.235)

Administrative costs are overall management costs not directly related to providing services to

participants. These costs can be related to personnel and non-personnel activities and may

include both direct and indirect costs. (20 CFR 645.235) Examples of administrative costs

include the following activities:

C Directors

C Personnel

C Fiscal

C Purchasing

CSecretaryC Payroll

C Budgeting

C Monitoring

C Management Information System (MIS)


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Appendix 1

Page 5 of 5


! Indirect Costs:

Indirect or overhead costs are normally charged to administration, except when charged to a

cost pool and allocated to a cost objective/category directly benefitted.

(20 CFR 645.235)

! Information Technology Costs:

The cost of information technology - computer hardware and software - needed for tracking

and monitoring shall not be charged to administration. (20 CFR 645.235)

Only the costs for information technology that is year 2000 compliant shall be allowable. (20

CFR 645.235)


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Appendix 2

WtW Competitive Grantees Included in Postaward Surveys

FIELDWORK

GRANTEE LOCATION AMOUNT

BEGINNING

DATE

ENDING

DATE

Work Place, Inc - S.W. Conn Bridgeport, CT $5,000,000 11/9/98 11/19/98Metropolitan Area Planning Council Boston, MA 4,082,065 11/23/98 12/4/98

County of Union Elizabeth, NJ 5,000,000 8/3/98 8/7/98

Hudson County Secaucus, NJ 4,914,297 11/17/98 11/20/98

Non-Profit Assistance Corporation New York, NY 4,871,904 11/2/98 11/6/98

Coalition for the Homeless Washington, DC 1,965,601 11/2/98 11/6/98

PIC of Philadelphia, Inc. Philadelphia, PA 4,351,247 12/4/98 12/16/98

Resources for Human Development, Inc. Philadelphia, PA 1,866,460 8/10/98 8/14/98

Hampton University Career Advancement Hampton, VA 4,898,000 10/19/98 11/5/98

CET-NATIONAL WtW PROJECT San Jose, CA 4,003,294 10/27/98 12/15/98

Total Action Against Poverty, Inc. Roanoke, Va 2,736,272 10/19/98 10/23/98

IAM CARES Upper Marlboro, MD 5,000,000 10/21/98 10/29/98

The NOAH Group, LLC Silver Spring, MD 7,800,000 11/2/98 11/9/98

The Ins. for Responsible Fatherhood Washington, DC 4,427,318 10/13/98 11/6/98

National Association of Private Industry Council Washington, DC 4,912,658 10/19/98 12/14/98

United Way of Central-Alabama Birmingham, AL 4,997,966 11/9/98 11/20/98

Mayor's Office of Citizens Employment & Training Atlanta, GA 5,000,000 10/19/98 10/29/98

Louisville and Jefferson PIC Louisville, KY 4,999,898 10/19/98 10/29/98

National Goodwill Industries WtW Consortium Macon, GA 5,300,000 11/12/98 11/19/98

Corporation for Ohio Appalachian Development Athens, OH 5,000,000 9/21/98 9/25/98

River Valley Resources, Incorporated Madison, IN 5,000,000 9/21/98 9/29/98

City of Detroit Employment and Training Department Detroit, MI 4,860,633 9/21/98 10/21/98

Bethel New Life Chicago, IL 2,739,506 10/19/98 10/30/98

DePaul University Chicago, IL 5,000,000 8/10/98 8/13/98

City of Chicago The Workforce Board Chicago, IL 3,000,000 12/10/98 1/19/99

Indianapolis PIC Indianapolis, IN 5,000,000 11/2/98 11/18/98

The City of Little Rock Little Rock, AR 5,000,000 10/27/98 11/3/98

Houston Works Houston, TX 5,000,000 10/27/98 11/4/98

Catholic Social Services of Albuquerque, Inc. Albuquerque, NM 1,343,133 10/28/98 11/5/98

National Goodwill Industries Welfare to Work Consortium San Antonio, TX 5,000,000 11/16/98 11/20/98

Rocky Mountain SER/Jobs for Progress, Inc. Denver, CO 1,460,864 11/16/98 11/18/98

CHARO Alliance Welfare to Work Los Angeles, CA 3,999,650 11/16/98 11/20/98

PIC of San Francisco, CA San Francisco, CA 4,189,231 10/13/98 10/23/98

The Cambodian Family Santa Ana, CA 1,216,167 11/2/98 11/6/98

Oakland Private Industry Council Oakland, CA 3,000,000 11/16/98 11/20/98

Total for 35 Grantees $146,936,164


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Appendix 3

Page 1 of 3

Suggested Areas for Inclusion in Grantee Written Policies and Procedures

C The work-first approach restricts the grantee from providing services (except job readiness)

until the participant has engaged in employment-based activities. Also, the procedures should

describe allowable activities for qualified participants.

C Procedures for recording, tracking and reporting the 70 percent minimum/30 percent

maximum expenditures to the appropriate cost categories.

C Eligibility requirements for the 70/30 percent programs at the grantee and subgrantee levels.

Procedures for determining and reviewing eligibility documentation.

C Proper assessment of skills, prior work experience, employability and other relevant

information including recordkeeping requirements for each participant.

C Fully define 15 percent administrative costs limitationand definitions for administrative and

indirect costs.

C Cash management procedures for authorized drawdowns, maintaining fund balances, and

reconciliations for cash and petty cash accounts.

C Program income procedures for recording and using the income to further delivery of theprogram and the return of income over $250 for interest earned on advances.

C Documentation requirements for verifying placements and retention to ensure accurate

reporting. Contracts and vouchers for job placement services must include a provision to

require that at least one-half of the placement payment occur after an eligible individual has

been in the workforce for 6 months. (Employer payroll records or wage reports are usually the

best documentation to verify 6 months on the job.)

C Procedures for developing and maintaining Individual Development Accounts. The

procedures should include requesting and receiving approval from the State and/or the DHHS.

C Identification ofallowable and unallowable costs and proper cost allocation from

Attachment B from OMB Circular A-122 or applicable circulars describing allowable and

unallowable costs.


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Appendix 3

Page 2 of 3


C Procedures for reporting obligated and deobligated costs not recorded in the financial

accounting system.

C Procurement and small purchases guidelines and procedures need to be comprehensive.

Procedures should include or specifically reference many of the more stringent requirements

mandated by the Federal Government or by the State and local governments. Specifically,

there should be written procedures that address items such as:

CProhibition of cost plus a percentage of cost contracting methods.

CA requirement that procurement and small purchases are made on the basis of full and open

competition.

CCost or price analysis be performed for each procurement action.

CProfits be negotiated as a separate element in all contracts that allow for profit.

CIdentification of procurements that require prior approval by DOL.

CProvisions prohibiting actions to break purchase quantities down into smaller components tocircumvent more stringent procurement requirements.

CRequirements that Requests For Proposal (RFP) be announced in a publication that has

general circulation in the competitive area.

C A provision that prohibits the construction or the purchase of facilities, buildings or capital

improvements using WtW funds.

C Approval, acquisition, tracking, inventories and disposition requirements for equipment and

supplies. Computer software/hardware must be year 2000 compliant.

C Procedures to ensure that physical inventories are conductedand reconciled at least every 2

years.


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Appendix 3

Page 3 of 3


C Contractual procedures for awarding contracts to qualified subrecipients including debarment

assurances and certifications provisions, Federal requirements that must be followed, CFDA

numbers, statements of understanding and compliance, and record retention.

C Procedures or a manual for Management Information Systems (MIS) controls, storage,

access, verification of reported data, and tracing reported data to source documents.

C MIS contingency plan for disasters and security risks.

C Monitoring procedures for the grantee and subgrantee levels which includes reviewing WtWrequirements, scheduling reviews, issuing reports, and resolving findings. Program procedures

for reviewing TANF information to ensure it was taken within 6 months of eligibility

determination; an assessment of skills, prior work experience and employability has been

performed; work first has been implemented before services are provided; and only allowable

activities have been provided. Financial monitoring procedures would include ensuring that at

least 70 percent of the funds are spent on the hard-to-employ, administrative costs do not

exceed the 15 percent or stated limitation, technology costs are within approved limitations, and

all reported expenditures are allowable costs.

C Grantee and subrecipient audit and audit resolution responsibilities under A-133.


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Appendix 4

Findings Matrix 1 of 2

Finding 1 Finding 2

Grantee

Inadequate

Internal

Controls Over

Cost

Limitations

Incomplete/

Inadequate

Management

Information

Systems

Inadequate

Internal ControlsOver Financial

Reporting

Lack of Formal

Agreement withTANF

Agencies

Lack of Formal

Eligibility

Procedures

Lack of Written

Policies and

Procedures

The Work Place, Inc. x x

Metropolitan Area Planning Co. x x

County of Union x

Hudson County x x

Non-Profit Assistance Corp. x x

Coalition for the Homeless x x x x x

PIC of Philadelphia x

Resources for Human Dev. x x

Hampton Univ Career Adv. x x x x x

Total Action Against Poverty x x x x x

IAM Cares, Center for Adm. x x x x x

The NOAH Group, LLC x x x x

The Institute for Responsible

Fatherhood & Family Revital.

Natl Assn of PICs x

CET x x x x

United Way of Central Alabama x

Mayor's Office of Citizens E & T x x x x x

Louisville & Jefferson PIC

National Goodwill Industries-GA x x

Corporation for Ohio Appal. x x x x

River Valley Resources, Inc. x

Detroit ETD x x

Bethel New Life x x x

DePaul University x x x x x

City of Chicago--The WFBoard x x x

Indianapolis PIC x x x x x

City of Little Rock x x

Houston Works x x

Catholic Social Services - Alb. x x x x x

National Goodwill Industries-TX x x x x x x

Rocky Mountain SER/Jobs for

CHARO Alliance WtW x x x x

PIC of San Francisco x x x

The Cambodian Family x x x

Oakland PIC x x x x x

22 11 16 14 12 27


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Appendix 4

Fin

department of labor: 05-99-008-03-386

Documents